ATTORNEY GENERAL HERRING CONTINUES FIGHT TO PROTECT STUDENT BORROWERS

~ Herring joins coalition of 23 attorneys general in filing a lawsuit against Secretary DeVos and the U.S. Department of Education challenging their action to unlawfully repeal the 2016 "borrower defense” regulations ~

RICHMOND (July 15, 2020) – Attorney General Mark R. Herring today joined a coalition of 23 attorneys general in filing a lawsuit against Secretary of Education Betsy DeVos and the U.S. Department of Education (ED) challenging their action to unlawfully repeal the 2016 "borrower defense” regulations and replace them with regulations that do nothing more than benefit predatory for-profit schools at the expense of defrauded students. Earlier this year, Attorney General Herring sent a letter to Congress commending its efforts to reject the new 2019 Borrower Defense Rule.

The 2016 borrower defense regulations established critical protections for student-borrowers who have been misled or defrauded by predatory schools by providing borrowers an efficient pathway to get relief from their federal student loans and creating robust deterrents for schools that engage in predatory conduct. Under the Trump Administration, ED repealed the 2016 regulations and replaced them with new regulations that make it virtually impossible for victimized students to obtain financial relief, while rolling back oversight over unscrupulous and predatory schools. In the lawsuit, the coalition argues that ED's decision to repeal and replace the Obama-era regulations violates the Administrative Procedure Act (APA), and asks the court to vacate ED's new regulations.

"From the beginning, the Trump Administration has chosen protecting for-profit colleges over protecting student borrowers,” said Attorney General Herring. "This new Borrower Defense Rule hurts Virginia student borrowers and takes away key protections, leaving them without options if they have been defrauded by a for-profit college. More than one million Virginia student borrowers have more than $30 billion in outstanding student loans and I will not stand by and allow the Trump Administration to abandon them.”  

The Higher Education Act requires that the Secretary of Education issue regulations that provide for a meaningful process for students to obtain federal student loan relief where their schools have engaged in misconduct. Consistent with this Congressional mandate, in November 2016, ED issued new borrower defense regulations that offered meaningful protections to defrauded student borrowers. The regulations built on lessons learned from the collapse of Corinthian Colleges – a predatory, for-profit chain of colleges that left tens of thousands of students across the nation in need of relief. Specifically, the 2016 regulations provided misled and defrauded borrowers access to a consistent, clear, fair, and transparent process to seek debt relief, and also protected taxpayers by holding schools that engage in misconduct accountable. The regulations also ensured that financially troubled schools provide financial protection to the government to ensure that, if they fail, taxpayers would not be left holding the bag.

Despite these new protections, upon taking office Secretary DeVos sided with for-profit schools and demonstrated public hostility to the 2016 borrower defense process. Just two weeks before the 2016 borrower-defense regulations were set to go into effect in 2017, the Trump Administration unlawfully delayed them. A coalition of 20 attorneys general, including AG Herring, successfully sued Secretary DeVos over the illegal delay. In November 2019, after the Secretary's failed delay attempts, ED issued replacement borrower defense regulations that put the interests of predatory schools ahead of student protections. The 2019 borrower defense regulations created a process designed to thwart relief for defrauded students and shield predatory schools from being held accountable.

In the lawsuit, filed in the U.S. District Court for the Northern District of California, the coalition argues that ED's repeal and replacement of the 2016 borrower defense regulations violates the APA because:

• It is arbitrary and capricious. The decision to repeal and replace the 2016 rule was not the product of reasoned decision making as required by the APA. In explaining its rationale for the new regulations, ED rejected prior agency determinations going back decades without explanation, grounded its analysis in fundamental misunderstandings, failed to consider alternatives, and disregarded facts and circumstances.
• It does not comply with Congress's requirement that the Secretary implement a meaningful process for borrowers to obtain relief. Instead, it establishes an illusory process that makes it practically impossible for students to qualify for borrower defense relief. ED admits as much by acknowledging that only around 4 percent of borrowers eligible for relief will actually get relief.

In October 2018, Attorney General Herring announced that a federal judge rejected the Trump Administration's challenge to the Borrower Defense Rule, ordering its immediate implementation for students nationwide. This ruling followed a victory Attorney General Herring won in federal court after he and a coalition of state attorneys general challenged the U.S. Department of Education's plan to abruptly rescind its Borrower Defense Rule which was designed to hold abusive higher education institutions accountable for cheating students and taxpayers out of billions of dollars in federal loans. The immediate implementation of the Borrower Defense rule meant that the U.S. Department of Education had to automatically discharge $381 million in loans for students whose schools closed.

Attorney General Herring has taken major actions against for-profit colleges for misleading students. In November 2015, for-profit education company Education Management Corporation announced it would significantly reform its recruiting and enrollment practices and forgive more than $2.29 million in loans for approximately 2,000 former students in Virginia through an agreement with the Attorney General and a group of state attorneys general. Nationwide, the agreement required the for-profit college company to forgive $102.8 million in outstanding loan debt held by more than 80,000 former students.

In December 2016, the Attorney General announced that more than 5,000 Virginia students formerly enrolled in schools operated by Corinthian Colleges, Inc. may be eligible for loan forgiveness. This came after the U.S Department of Education found that Corinthian College and its subsidiaries published misleading job placement rates for many programs between 2010 and 2014. Following this announcement, Attorney General Herring urged Secretary DeVos and the Department of Education to follow through on their commitment to cancel student debt for students in Virginia and around the country who were victimized by Corinthian Colleges' practices.

Attorney General Herring announced in January of 2019 that he and 48 other attorneys general reached a settlement with for-profit education company Career Education Corporation (CEC). The terms of the settlement required CEC to reform its recruiting and enrollment practices and forgo collecting about $493.7 million in debts owed by 179,529 students nationally. In Virginia, 3,094 students will receive relief totaling $8,022,178.

Joining Attorney General Herring in filing today's lawsuit are the attorneys general of California, Colorado, Connecticut, Delaware, Hawaii, Illinois, Maine, Maryland, Massachusetts, Michigan, Minnesota, Nevada, New Jersey, New Mexico, New York, North Carolina, Oregon, Pennsylvania, Rhode Island, Vermont, Wisconsin, and the District of Columbia.

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